Venezuela’s Chávez sets fast nationalization pace
CARACAS – Venezuelan President Hugo Chavez is setting a faster than expected pace in his nationalization drive toward self-styled socialism, striking three takeover deals that push out U.S. firms in about a month.
Chavez, an ally of Cuba who is vehemently opposed to what he sees as U.S. imperialism, is boosting state involvement in Venezuela, the No. 4 supplier of oil to the United States, as he consolidates power after a landslide re-election last year.
Venezuelan authorities said on Tuesday they would buy the assets of U.S. power company CMS for $106 million, a day after cutting a similar deal with telecom giant Verizon for $572 million.
Last week the government signed an accord to buy the holdings of U.S.-based global power generation firm AES Corp. for $750 million despite analysts’ predictions of protracted takeover battles.
“The government has showed it’s clearly willing to move at a particularly fast pace to deliver on promises,” said Patrick Esteruelas, an analyst with the Eurasia Group.
The deals came two weeks after Chavez received special powers to rule by decree and five weeks after he vowed to nationalize the telecommunications and power utilities.
The announcements on January 8, which Esteruelas dubbed “Red Monday,” wiped out a fifth of the Caracas stock exchange’s value.
Chavez quickly implemented the nationalizations by avoiding protracted legal battles and outright seizures, and, instead, striking buyout deals.
The companies did not have the choice to hold on to their investments, but they and economists said the buyout terms were tough but fair given the nation’s deteriorating investment climate.
New Vice President Jorge Rodriguez, a central player in the nationalization effort, cited the state’s purchase of Verizon’s 29 percent stake in Venezuelan phone company CANTV as a sign the process was “fast and transparent.”
Chavez is in the vanguard of Latin America’s resurgent left, which has also swept Bolivia and Ecuador with promises to roll back 1990s’ free-market reforms that first brought companies like AES and Verizon to Venezuela.
The nationalization push follows Venezuela’s campaign over the previous two years to regain control of its oilfields and boost taxes on industry operations.
But Chavez, a former army officer, may face a tougher fight to take control by May 1 of four oil projects in the Orinoco basin worth $30 billion.
Rex Tillerson, chief of Texas-based Exxon Mobil, expressed doubt that change of control of the Orinoco projects could meet Chavez’ ambitious deadline.
The aggressive nationalization efforts have sparked investor concerns about working in Venezuela, already a tough environment due to double-digit inflation and heavy government regulations.
Chavez’s heavy social spending has built up political support but has sparked inflation, and government price controls at times restrict the supply of basic consumer goods.